We are studying mutual bond funds for the purpose of investing several funds. For this particular study, we want to focus on the assets of a fund and its five-year performance. The question is: Can the five-year rate of return be estimated based on the assets of the fund? Nine mutual funds were selected at random, and their assets and rates of return are shown below (see attached file).
a. Draw a scatter diagram
b. Compute the coefficient of correlation.
c. Compute the coefficient of determination.
d. Write a brief report of your findings for parts b and c.
e. Determine the regression equation. Use assets as the independent variable
f. For a fund with $400.0 million in sales, determine the five-year rate of return (in percent).
This solution analyzes the data given for the assets of a fund and its five-year performance, and determines the coefficient of correlation & determination, regression equation, and five-year rate of return with step-by-step workings and calculations.
Investment: government bonds, mutual funds, money market funds
An investor has at most $40000 to invest in government bonds, mutual funds, and money
market funds. The average yields for the government bonds, mutual funds, and money market
funds are 4%, 11% and 9% respectively. The investor's policy requires that the total amount
invested in mutual and money market funds not exceed the amount invested in government
bonds. How much should be invested in each type of investment in order to maximize the
return? What is the maximum return in the first year?
How much should be invested in government bonds?
How much should be invested in mutual funds?
How much should be invested in money market funds?
What is the maximum return in the first year?